Greis vs Modell, Essay Example

A derivative suit in the United States is based upon state laws. However, all laws differ depending on which state the law is filed under. The procedures of a derivative suit can be found under the Model Business Corporation Act (MBCA). This is to protect all shareholders from any wrongdoing they feel has been placed upon them or their corporation. It is up to the MBCA to reject or accept the demand.

In a derivative litigation, a board of directors of a committee can involve investigation which is conducted either by the board of committees

According to the MBCA, each shareholder, no matter the amount of value of shares owned by the shareholder of any of the corporations is entitled only one vote during a meeting which is previously set by the corporations, including all members of the corporation. If one or more members of the corporation is absent, a proxy vote is required. However, the committee must be informed at least 48 hours before the voting commences.

As a shareholder, Gries is entitled one vote, like Modell and the other employees present during the board meeting. It does not matter if Modell owns a bigger percentage of shares of the Cleveland Browns football team, Gries is still entitled to the same number of votes as Modell, which is one. It poses as a speculation that there all other shareholders in the board meeting were also employed by the stadium, it puts Gries in a tight situation.

The board did agree on buying the stadium, with a majority-wins result of voting, which is definitely approved by the MBCA. Putting Gries at a loss. However, according to Chapter 7.32 in the Shareholders agreement of MBCA, section b.1A states that “An agreement authorized by this section shall be set forth in the articles of incorporation or bylaws and approved by all persons who are shareholders at the time of agreement…”. Gries has the right to rescine purchase because action was made without his consent, and no written article or document was stated to be signed nor made by any of the shareholders. Therefore, Gries wins.